Real Estate Math
A Kentucky investment property generates annual gross rents of $36,000. Operating expenses are $14,400. The property sells for $260,000. What is the capitalization rate?
A8.3%✓ Correct
B5.5%
C13.8%
D7.2%
Explanation
NOI = Gross rents minus Operating expenses = $36,000 minus $14,400 = $21,600. Cap rate = NOI / Sale price = $21,600 / $260,000 = 0.0831 = approximately 8.3%.
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